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January 13th, 2021:

LNG Prices Soar As A Cold Wave Slams Asia, Sea Transport Snarls

American Energy Coalition - January 13th, 2021

“A blast of cold weather in northeast Asia and a shortage of ships for transporting gas have sparked a scramble for cargoes of liquefied natural gas, igniting a steep rise in prices”, according to an article published in today’s Wall Street Journal.

“Prices for LNG shipped to China, Japan and South Korea, all major importers, have surged from record lows to all-time highs in less than a year. The regional price benchmark assessed by S&P Global Platts rose to $28.221 per million British thermal units on Monday, and has shot up 87% so far in 2021.”

“LNG is 15 times more expensive than it was when coronavirus hammered demand for oil and gas in the spring of 2020, the nadir of a yearslong slump in gas prices globally. In some cases, prices paid on the ground for cargoes have exceeded the levels indicated by Platts”, says the Journal story.

““It is a perfect storm,” said Toby Dunipace, executive director for LNG at London shipbroker Simpson Spence Young. Stores of gas in East Asia were severely depleted after the mercury plunged, he added.”

“Despite outages for producers in Australia, Norway and elsewhere, there is no global shortage of LNG. The trouble is moving gas to where it is needed.”

“Freezing weather in Asia—temperatures plumbed as low as minus 3 degrees Fahrenheit in Beijing last week, a half-century low—is creating more demand for gas, which is burned to generate electricity and warm homes and offices. A lack of available ships means gas can’t move fast enough from the U.S. and Europe, where it is plentiful, to sate this demand”, reports the WSJ.

“Exporters on the Gulf Coast are running at full throttle to ship the surplus of gas in the U.S. to Asia and profit from significantly higher prices in the region. Asia imported a record 3.4 million metric tons of U.S. LNG in December, according to cargo-tracking firm Vortexa.”

“That has resulted in a dearth of boats available for LNG traders and a jump in the price for chartering them. “It is very hard to find ships,” said Øystein Kalleklev, chief executive of Bermuda-based Flex LNG, which owns a fleet of LNG carriers.”

“Despite the strong demand, several cargoes that were due to depart the Gulf Coast in February have been canceled because of a lack of ships, according to market participants. That is a turnaround from last year, when scores of cargoes were scrapped for a different reason: A lack of demand.”

“Charter prices for vessels moving LNG from the Gulf Coast to Europe rocketed to $322,500 a day Friday from about $190,000 a day at the end of 2020, according to Spark Commodities, which collates data from shipbrokers”, writes the Wall Street Journal.

“Asia’s hunt for LNG has prompted some unusual activity. Buyers have approached Canada LNG Group looking to buy gas in 40-foot containers transported by container ships, said Louis Philippe, managing partner at the supplier. LNG is normally moved on specialist carriers.”

“Shipping and gas markets are feeding on each other, driving Asian LNG prices far above those in the rest of the world. Utilities are competing for a small number of cargoes that could be delivered by February. Traders are passing higher shipping rates onto end users. Another cost they look to feed through to customers is that of LNG lost to evaporation during the voyage, known as boil-off gas.”

“More carriers are expected to arrive in Asia toward the end of February, pulling prices for LNG in March well below February levels, said Chris Durman, head of LNG analytics at Platts. Still, traders expect little letup in prices until the weather thaws.”

“The spike in LNG prices has rippled through other markets, helping to propel electricity prices in Japan to a series of record highs. Some industrial users of the fuel in China have gone without because authorities are giving priority to gas for heat generation, said Robert Sims, research director for short-term LNG at Wood Mackenzie, a consulting firm”, reported by the Journal.

““All the main LNG buyers [in Asia] are concerned they’re going to be short,” said Brayton Tom, senior risk manager for energy markets at StoneX Group.”

To read the original Wall Street Journal story, go to: https://www.wsj.com/articles/cold-snap-sparks-record-rise-in-natural-gas-prices-in-asia-11610360735

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